TAIPEI, TAIWAN: In the year 2009, NAND Flash makers' supply strategies are mostly about retiring less cost-competitive 200mm capacities and pending new 300mm capacity expansion. Current 300 mm capacity process technology are being upgraded to increase bit output, to lower CAPEX and decelerate the bit supply growth pace.

DRAMeXchange estimates that 200 mm NAND Flash wafer production both will decrease 20 percent QoQ in 4Q08 and 1Q09, and the 1Q09 200mm wafer capacity will be less than 20 percent of the total NAND Flash wafer capacity. This will also drive the output of NAND Flash chips with the density under 8Gb MLC to decrease sharply.

Meanwhile, along with the 4x nm will become the mainstream process technology in the 300mm Fab in 2Q09, the portion of MLC with the density more than 16Gb will continue to increase. While the difficulties gets higher when the process technology narrows down, the 3x nm process technology portion will not raise significantly until 4Q09.

Due to uncertainties in macro economy and NAND Flash market visibility is unclear, most NAND Flash suppliers principally will adjust their production target according to the interval of market demand growth. The production plans will also depend upon how quickly the market demand revives. DRAMeXchange forecasts that NAND Flash supply bit growth will decrease from 132.1 percent yoy in 2008 to 65.4 percent yoy in 2009.

Shipments of NAND Flash end applications in 2009 will slightly decrease from 2008 and the market size of SSD, which is the new killer application, is still in infancy. Although 2008 NAND Flash prices had plunged deeply, it will help drive up the memory content per system in most applications in 2009.

Therefore, NAND Flash demand bit growth is expected to come down to 77.5 percent YoY in 2009 from 120 percent YoY in 2008. Under impacts of slow season effect in 1H09 and the global slump spreading, although the NAND Flash suppliers had previously taken actions of capacity cut and annual maintenance, with the decreasing of both demand and supply sides.

DRAMeXchange expects the NAND Flash market to still be in the oversupply situation in 1H09. Therefore, whether the sharply contract price rebound momentum before Chinese Lunar New Year can last into 1Q09 or not will depend on the recovery of market demand later.

In 2H09, since the demand situation in the 2H08 base period was low, the NAND Flash related products are expected to perform better than in 1H09. If NAND Flash makers can control the growth speed of their capacity expansion, the NAND Flash market supply and demand may reach equilibrium or slightly shortage in 2H09. The 2H09 hot season effect may activate the demand to drive up NAND Flash price gradually.